Why Startup Ideas Are Often Worthless
One of the most controversial things that I like to say around a group of entrepreneurs is my assertion that ideas are worthless. This notion has started many disagreements, but I don’t say it to ruffle feathers. I say it to help people put ideas in perspective. Ideas, by themselves, are not worth anything. Entrepreneur must act on their ideas before they can make any money.
I could qualify the statement to make it more palpable by saying: “ideas without action are worthless.” This would undoubtedly stir up less controversy, but would wrongfully imply that one could combine his or her idea with someone else’s action and magically create value. But, in order for entrepreneurs to reap financial rewards from their own ideas, they must act on the ideas in ways that create the most value.
All too often, people will think up ideas and assume the hard part is done. Next, they will often ask people to sign non-disclosures before discussing their ideas, or they expect huge chucks of equity in the startups that do decide to act on their ideas. I find this frustrating because the real value is created by individuals who do the work to turn an idea into a reality.
For example, here’s a good idea for a business:
A link-shortener that emails the link owner every time the link is clicked. For instance, a person might use this to find out when a prospect clicks on a sales presentation link. Or, someone could use the site to learn when people hit certain pages of a site. The company makes money by placing context-relevant ads in the body of the emails.
This is an idea that I’ve had for a while and I’ve been unable to find such a site online. So, assuming I’m the originator of the idea, how much should I get paid for it? Probably nothing. In order for this to become a company, at the very least I need to find a developer to write the software and then spend some time marketing it. If I could do that and find some users who actually clicked on the ads, there might be some value. However, without the action, there is no value.
Let’s say that you, the reader, liked the idea and wanted to run with it. You do all the work. Should I get paid? The answer, again, is probably not. If you take this idea and turn it into something valuable, why should I benefit? In order for me to actually benefit financially from the idea, I should have to actually do something to help create value.
Now, let’s say that I go out and recruit someone to implement this idea. I pay them a fair salary, provide all the branding and marketing ideas that I have, and help them write a spec for the program. Should I get paid? Probably. After all, I have now taken action to turn the idea into reality. In this case, I’m paying someone a fair wage and I’m assuming all the risk. I can rightfully take my rewards.
Finally, let’s say that you email me and we work together to bring the idea to life. I deserve a reward in proportion to what I actually do to make the idea a reality. But, if you do all the work, you deserve all the reward. If I contribute 10% of what is needed to create value, I deserve 10% of the reward. It doesn’t matter that it was my idea. All that matters is how much I helped in the process of creating tangible value from the idea. Unless I act, I should get nothing.
We live in a culture that tries to place real value on intangible things like: ideas, education, experience, and relationships. The more ideas, education, experience, and relationships we have, the more we think we deserve. This puts people with ideas, education, experience, and relationships (people like me) in a position where it is relatively easy to take advantage of those assets. Some people do take advantage. You see it every day. Younger entrepreneurs are asked to give up disproportionately large chucks of equity to more experienced entrepreneurs before any work is performed. This doesn’t mean that ideas, education, experience, and relationships aren’t important- they are. But only action can create value.
My point is this: being an entrepreneur is about taking action. Ideas, while important, aren’t valuable in themselves. They simply serve to help guide the actions we choose to take.